IN SEARCH OF ALTERNATIVE COCONUT DEVELOPMENT FOR COMMUNITIES FOR THE EVENTUAL UTILIZATION OF THE COCONUT LEVY FUNDS A discussion

paper for the 2nd National Coconut Farmers Conference Joey Faustino, Executive Director, COIR, Inc. December 2013

Part I. COCO CONFERENCE 1 in a Nutshell: A PROLOGUE

In the Discussion Paper for the 1st National Coconut Farmers Conference1 held in 09 November 2012, the national coconut statistics clearly confirmed that the current state of the industry may not at all be appropriately called a coconut industry it had merely been a copra industry, principally for crude coconut oil processing. Crude coconut oil (CNO) is a main export commodity of the country for centuries. The industry was designed as such with the other high-value by-products serving only as secondary. The copra industry had also proven to be generally dependent on the international market from which local and multinational corporations had greatly profited fromto the detriment of the copra producers, the millions of small coconut farmers and farm workers of the country.

While the copra industry is said to be the leading agricultural dollar earner for the country, it has, ironically, caused the coconut farmers and their communities to slide continuingly into deeper poverty throughout decades. And while government recognizes that, in fact, the coconut farmers are poorest among the poor farmers in the country, it had miserably failed to apply a lasting solution to the age-old poverty problem. So-called band-aid solutions have been in governments menu, administration after administration replanting,
1

A Small Farmer-Centered Approach to Sustainable Coconut Industry Development, Joey Faustino, Executive Director, Coconut Industry Reform (COIR) Movement, Inc.

Page

rehabilitation, fertilization, GMAs corn distribution program to the poorest provinces, and the recent conditional cash transfer for the poor.

None among those contained in the past menu of programs addresses fundamental perennial problems of the coconut farming communities and the industry. These problems were, by choice, seen only from a limited perspective. In the Coconut Summit of 2010, Dr. Cielito Habito cited three assertions that had flawed the growth of Philippine Agriculture and the industry:

1. Success in the sector is not measured in terms of production levels, but in farmers income and welfare; 2. Farmers will not invest in improved productivity for as long as they receive a meager share of their products value; and, 3. Local monopsonies have for too long been a persistent feature of the rural economy, and contribute to non-inclusive growth.

The 2010 Summit was held under the watch of, then, newly appointed DA Secretary Proceso Alcala with PCA still in the hands of the previous Arroyo Administration appointee. But even with a change of hands in PCA the situation had remained the same. It clearly appears that the current administration had not taken heed of such logical advises and simply continued to replicate earlier passing
Page

interventions as is, where is!

By October 5, 2012 the Coconut Industry Investment Fund preferred shares2 in San Miguel Corporation was redeemed, as offered by Eduardo Cojuangco Jr. The redemption of said shares raked in over Php20 billion gains for SMC. SMC paid the amount of Php 71 billion. The principal amount of P56.5 billion was taken to the National Treasury while the rest (over P14 billion) was deposited to the United Coconut Planters Bank. Government offered no explanation for splitting depositories. What is obvious is that the principal was taken to the National Treasury and the dividends handed to UCPB implying a difference in treatment between the two.
23 September 2012

As if in perfect synchronicity, the Supreme Court issued a final decision on the case of the CIIF-SMC shares earlier dated September 4, 2012 but released September 27 in time for the October 5 redemption of the said shares. This decision declared final the earlier Sandiganbayan pronouncements that: the CIIF Oil Mills, the 14 Holding Companies and the CIIF-SMC shares are public, owned by government in trust for all the coconut farmers. The decision went on to say that the funds may be used only for the benefit of all coconut farmers and for the development of the coconut industry. The Entry of Judgment, however, has yet to be served.
2

The sequestered CIIF-SMC shares were originally common shares which were converted to preferred shares in 2009 with an offer of redemption by Eduardo Cojuangco Jr. under a guaranteed value of Php75 per share after three years. The Philippine Commission on Good Government (PCGG) under the Gloria Macapagal-Arroyo administration, chaired by Camilo Sabio, fostered the deal and asked permission from the Supreme Court. With a vote of 8 justices, a decision issued on September 17, 2009 by the Supreme Court, not only permitted, but even ordered the PCGG to convert the common shares to preferred shares. The conversion took out government from the board of SMC leaving everything under Cojuangcos leadership, including the other sequestered block of shares (20%) which were named to his dummy companies. Consequently, government lost over Php20 billion (common vs. preferred value) upon redemption to the advantage of SMC. Parallel to these events, Chief Justice Reynato Puno, who was one of the 8 justices, retired on May 2010 and became Independent Director of SMC by January 2011.

Page

Since then a scramble for the use of the monies by various government agencies ensued. Under the guidance of the Presidential Task Force on Coco Levy, created May 2011, various sitting agencies (PMS, PCGG, DAR, NAPC, DA, PCA, DBM & DOF) discussed the drafting of an executive order to govern the use of the monies this was practically being drafted even before any determination of the funds utiliza tion. The Philippine Coconut Authority and the National Anti-Poverty Commission both crafted their own roadmaps for development: one for the industry and another for poverty reduction in the coconut farming sector. Both roadmaps had been found to lack exhaustive discussion with the coconut farmer groups. The programs presented in both roadmaps were considerable coconut programs that have been traditionally considered under General Appropriations but appeared inappropriate for the application of coco levy funds a special fund in trust for the benefit of the coconut farmers and the industry. Moreover, the presence of two separate roadmaps for the industry and the farmers was alarming. Definitely, such a perspective had failed to consider that the development of the coconut farming communities ought not to be separate and distinct to achieve a sustainable coconut industry.

The Cojuangco-controlled United Coconut Planters Bank Coconut Industry Investment Fund Group of Companies3 immediately joined the fray. UCPB and Cocolife sounded off
3

President Aquinos choice of appointees to key positions in the UCPB-CIIF Group of Companies are either close associates or supportive of his uncle, Eduardo Cojuangco Jr., except for former Sen. Wigberto Tanada who was appointed as Chair of the Oil Mills Group.

Page

to claim Php 7.5 billion each for investment contributions made in the CIIF-SMC shares care of PCGG Chair Andy Butista. (Does this explain the split in depository?) Even the CIIF Oil Mills forwarded a claim of more than P2 billion from the said funds. Reports have it that the Department of Finance backed the idea of re-financing the coco levy funded companies the same companies used by the Cojuangco clique to dupe the coconut farmers. And to deceive the public of a popular farmer backing, the Cojuango Group staged a conference with the Cocofed on top, supported by the Pambansang Koalisyon ng mga Magsasaka at Manggagawa sa Niyugan (PKSMMN) and the Philippine Association of Small Coconut Farmers Organizations (PASCFO)4 to lay claim on the levy funds.

It was primarily these alarming considerations that pushed the Coconut Industry Reform (COIR) Movement to exhaust efforts to hold the 1st National Coconut Farmers Conference in November 2012 in cooperation with the Department of Agriculture. There was a great need to have an alternative forum where the issue of the coconut levy and industry development may be more sanely discussed.

After inputs, open fora and serious discussions / workshops on the current conditions, including that of the recovered coco levies, the 1st Conference supported 2 basic programs for inclusion and integration to the coconut industry development roadmap:

The PKSMMN (Efren Villasenor) and the PASCFO (Charles Avila) all ran for Partylist under Cocofed in the 2012 elections but was disqualified by COMELEC. The Supreme Court upheld the disqualification.

Page

The Bukod-Kopra Program

Bukod-Kopra is a strategy to utilize other resources in the coconut farms. While in the state of the copra-based industry there are still several options that can be taken to somehow effect increased incomes or improve lives of the poor coconut farmers, farm workers and their communities particularly the optimization of the use of the coconuts and the coco lands, whichever is applicable. These options may do well to serve during a transition stage from the copra-based industry to the new fresh (fresco) coconut industry.

The FRESCO Program

The new fresh coconut (FRESCO) industry is essentially non-coprabased. The movers of the fresco industry had proven that copra production utilizes only 25% of the real value of coconuts. Fresco is a method where fresh mature coconut serves as raw material for a long chain of interlinked (integrated) processing resulting to various stageby-stage products and by-products capable of being economically feasible in
Page

smaller village-level scales. The products are food-grade and clean as

differentiated from the traditional copra-making. These products, mostly food and oil, would not have to depend on the international oil market prices for farm-level value. In fact, even the local communities where processing or semiprocessing facilities are positioned can partake of benefits and consume the healthy food products themselves. Most importantly, the new coconut industry must be made accessible to the farming communities which they can call their own.

For consideration of the Aquino Administration, the Conference posed the following resolutions and recommendations, addressed to Sec. Proceso Alcala: 5

(1) Protection of the coconut levy funds shall be ensured by declaring it a COCONUT FARMERS TRUST FUND. Pending legislation, the President may issue an Executive Order to carry on the same purposes. But to allow adequate protection of the funds for the coconut farmers and the industry, the President can certify HB No. 5070 / SB No. 2978 as urgent. To acquire coconut farmers' confidence, it is highly recommended that Oscar Santos and Wigberto Tanada be appointed members of the Trust Fund.

(2) Preservation of the coconut levy funds for continuing support to poor coconut farmers programs and development of the industry shall be made by managing them as perpetual funds, utilizing only annual interests / dividends for the programs and related spending.

(3) Programs funded by coco levies shall be special programs (not mere extension programs of government) with oversight of a special body specifically tasked for the various purposes covered (management, utilization, monitoring and feedback, recovery of other coco levy assets) with adequate (majority) representation by the
5

The Conference resolutions were formally forwarded by the Coconut Industry Reform Movement to Secretary Proceso Alcala in a letter received by the DA-OSEC on 14 November 2012. (Refer to ANNEXES Part 1).

Page

sector.

(4) Massive information dissemination on the true state of the coconut industry and promotion of the various potentials of the coconut fresco products thru tri-media shall be launched by government in partnership with civil society organizations, especially for the understanding of the farmer-producers and their communities. Capabilitybuilding seminars and trainings to couple information dissemination.

(5) Programs funded by coconut levies shall be a product of continuing consultations with the coconut farming sector and the participating local communities thru local mechanisms such as the Local Coconut Industry Development Councils and the like.

(6) Village-level integration of production thru processing of the coconut products shall be a primary agenda with the use of coco levy funds, to include optimization of the farms thru multi-cropping and /or livestock raising.

(7) Transparency on utilization of the coconut levies shall be ensured and reported to the publics thru tri-media and the internet together with offsite-onsite third-party monitoring and feedback mechanisms from the beneficiaries.

(8) Continuing research and market studies for products of the new fresco coconut industry shall be conducted for dissemination to the participating communities.

(9) Recovery of other portions of the coco levies shall be vigorously pursued on behalf of the farmers and the industry.

(10) Adequate coconut farmers representation in the coconut levy funded companies shall be made to drive the companies into fulfilling its original mandate while under
Page

governments care and control.

(11) A declaration of policy made on the need to fast-track agrarian reform in coconut lands in line with the development of the coconut industry.

Other recommendations that required further studies were put on record such as the
coconut registry and social security for coconut farmers.

Secretary Alcala, during the conference, responded on the positive to carry the position of managing the recovered coco levies as a perpetual trust fund and that the funds should benefit the coconut farming communities. He further asked COIR to immediately help out his team in crafting a presentation, narrative & PowerPoint, of programs specifically village-level processing for the President and the Presidential Task Force on the Coco Levy.

Part II. COCO TRENDS & REVIEW (November 2012 - November 2013)

The prices of copra had stayed close to <P20 per kilo level at the millgate in 2012 and went up only by 4th quarter of 2013. On the average, this translates to P14-16 per kilo of copra at the farmgates. Coconut farmers now feel that the price level is too low for

Page

trend for decades. The main reason why farmers feel this way is because, in very recent

comfort. But this is, more or less, the stable price of copra as based on the world market

years, coconut oil prices in the international market surged enormously pegging copra prices at Php 40-50 per kilo. The condition renewed the interest of the farmers on the crop but production had stayed low. And as in any commodity, such a trend did not take long to normalize as copra production increased and things were back just as they were for the farmers. The coco farmers would not even notice that increased prices of raw material copra had also increased prices of all finished products using coconut oil products which they will never be able to afford as long as they produce and sell only copra. Even the CIIF Oil Mills Group and oleochemical manufacturers, at the point when prices of copra became too high, started using the alternative palm oil of Malaysia and Indonesia.

A COIR countdown showed a total of 22 provinces that had established Local Coconut Industry Development Councils (LCIDCs)6 at the provincial level. Davao Oriental, Compostela Valley, Quezon and Camarines Norte and Sur, COIR program areas, account for a total of 29 municipal-level and 293 barangay-level LCIDCs. Not all of the LCIDCs, however, have been actively functioning.
COIR TARGET 20 MunicipalBased LCIDCs
Luzon COIR Project Areas Quezon Camarines Norte PCA-COIR Project-initiated Isabela Catanduanes Mindoro Occidental Ilocos Norte
6

ACHIEVED 29 MunicipalBased LCIDCs

Provincial-level LCIDCs Visayas

120 BarangayBased LCIDCs

293 BarangayBased LCIDCs

UNPLANNED 22 ProvinceBased LCIDCs

Mindanao

Davao Oriental
7

Leyte Catarman Siquihor Bohol

Tawi-Tawi

Local Coconut Industry Development Councils are local sectoral mechanisms under the Local Development Councils to involve the coco farmers and the communities in planning and implementing development initiatives for coconut industry development. The LCIDC Concept originated from studies and consultations by the Coconut Industry Reform (COIR) Movement. 7 The Project Report on LCIDC Building through the PCA remains unavailable more than a year after implementation. The only source of documentation for the said project is PCA Director Rafael Sarucam (Refer to ANNEXES Part 2: Ka Raffy and LCIDC Building).

Page

10

Camarines Sur Mindoro Oriental La Union Albay Palawan Pangasinan Sorsogon Aurora Marinduque 15

Negros Oriental

Under COIRs watch there are 3 communities, 2 in Davao Oriental and 1 in Camarines Norte, which pursued the Bukod-Kopra and FRESCO concepts:

1. The ARSK in Brgy. Nangan, Gov. Generoso

Ms. Conchita Silor-Masin also known as Nanay Ching chairs the Agraryong Repormang Samahan ng mga Kababaihan (ARSK)8. She attended the 1st National Conference. Nanay Ching and the Association of mothers all aspire for the development of the 65-hectare coco land awarded them by CARP. There was a time when COIR supported the ARSKs copra trading endeavor with a small grant from Bread for the World, Germany. But that effort hardly made any impact to the beneficiaries. After attending a training organized by COIR, where Mr. Jun Castillo was resource person, Nanay Ching taught the ARSK the production of the coconut water concentrate, an oyster sauce-like gourmet sauce. With 120 trees per hectare and quite a good yield of 60 nuts per tree (due to organic vegetable production), the association could muster 156,000 liters

The ARSK is composed of 120 women farmers in Barangay Nangan, Governor Generoso, davao Oriental. (Refer to ANNEXES Part 2: The Bukod-Kopra Women of Governor Generoso, Davao Oriental )

Page

11

of mature coconut water per year or 7,800 liters of coconut water concentrate. Having this in mind, the women farmers started collecting coconut water from copra-making, cooking and selling the sauce (200 pesos/liter) in their neighboring communities. The product eventually gained popularity in and outside Barangay Nangan, Governor Generoso. Today one could hardly find available stocks of the sauce in the ARSK farm since consumers order as far as Davao City.

Apart from the sauce, the Association had also pioneered producing an energy drink from the mature coco water in the Barangay. The production had already been partly supported by the local government unit, the Mayors Office. Employees of the municipal office have ordered the pasteurized energy drink for 10 Pesos/ 250 ml. So far the feedback had been positive. The consumers had found the drink to be hydrating and also helpful to those with diabetes. For ARSK, value addition to the coconuts is not simply limited to increased earnings of the women farmers, but that they also contribute to the development of the coconut industry as well by introducing community-based products which is in accordance with their own needs and resources. Today some consumers
The inventor inspecting ARSK farm.

deliver mature coconut water to Nanay

Ching in exchange for the sauce or pasteurized energy drink.

Interestingly, the ARSK had embraced the FRESCO concept and had realized how the copra industry had kept them poor through time. Through a linkage with the COIR networks, they are now tying up with Sarlo Gentapan, the inventor of coco biolubricants9, to gain more value-addition to their coconuts. COIR is helping out
9

Refer to Annexes Part 6: Coconut Biolubricant by Sarlo Gentapan

Page

12

in locating direct markets for the biolube through Corporate Social Responsibility programs of companies with social passion and environmental concern.

2. The Municipality of San Isidro

The municipality of San Isidro is strategically located at the center of the five municipalities of District 2 in Davao Oriental. It also houses the soon-to-be worldrenowned Mount Hamiguitan the bonzai mountain.
The Mayor meeting with the Barangay LCIDCs.

In previous years Local Coconut Industry Development

Councils (LCIDCs) were established in all of San Isidros 16 barangays. Recently, under the leadership of Mayor Tina Yu, the municipality created its municipallevel LCIDC. From hence on the municipal leadership had prioritized coconut development in the area. Combining the opportunities to come via the opening of UNESCO of Mt. Hamiguitan and surveying its biggest agricultural asset, coconuts, the municipality ventured to craft a clear direction for its coconut farmers and the industry applying a concept of COCO-TOURISM. Simply put, the Mayor believes that value-addition to coconuts can be organized for the small farmers to benefit from, especially with the expected influx of tourists Mt. Hamiguitan will bring. To start up the concept, the municipality is now planning to set up two FRESCA stations: one at the entrance to the municipality and another at the foot of Mt. Hamiguitan. The FRESCA stations shall produce Fresh Coconut Oil (FCO) and the Coconut Milkflour for use in the municipality. The mature coconut water shall be used for concentrate to produce the gourmet sauce and healthy energy drinks

Page

Mt. Hamiguitans

13

combined with

spring water. The FCO may also be utilized to produce essential oils blended with the mountains special herbs.

3. MAGSACA in Labo, Camarines Norte.

The Magsasaka at Manggagawa sa Niyugan ng Camarines Norte (MAGSACA) is a local peoples organization (PO) affiliated with the Nagkakaisang Ugnayan ng mga Maliliit na Magsasaka at Manggagawa sa Niyugan (NIUGAN), a national coconut farmers organization. The local PO initiated the creation of the Local Coconut Industry Development Council (LCIDC) in Labo, Camarines Norte to stir up discussions on coconut community development. In the following years some 28/52 barangays followed and organized their own LCIDCs. The MAGSACA Chair, Ka Raffy Sarucam also became chair of the Labo Coconut Industry Development Council and, later, a member of the Philippine Coconut Authority Governing Board. Since then several trainings on alternative uses for coconuts have been conducted in the municipality via the LCIDCs.

The 28 participating barangay LCIDCs and the Labo Coconut Industry Development Council agreed on the following idea: Walang lalabas na niyog sa Labo. The LCIDCs aspire to process the raw material, coconuts, in the area and not sell them as copra or whole nut. Copra and whole nuts usually go all the way to Quezon province for processing. Thus the LCIDCs are now engaging with the newly elected local government officials and participating in the Local Development Councils to craft a

Page

development plan for the municipality of Labo. The Labo LCIDCs are targeting to

14

short-medium-long term coconut

set up FRESCA stations in two areas: the Poblacion, the center of business, and in Talobatib, a hub that leads to other municipalities in the Tagalog-speaking District. Relevant in the choice of site is the visibility of the stations so that it may be replicated in the whole of Labo.

Notable during the period, too, was the devastating effect of Typhoon Pablo (December 2012) in the biggest coconut producing region of Davao. Never before hit by typhoons, the region was not just ready for a super typhoon. The provinces of Compostela Valley and Davao Oriental were hit the most felling houses and trees on its path. Hundreds perished and thousands were evacuated to safer grounds. After the storm there were few houses to go back to with no crops left for food including coconuts. The Department of Agriculture estimated losses on coconuts to reach Php 8 billion. The Davao Oriental Provincial Coconut Industry Development Council estimated at least 2 million coconut trees wiped out in the three municipalities of Boston, Cateel and Banganga. More importantly, the major source of income for the majority in the communities affected was copra. The countrys other coconut producing regions, often hit by typhoons before, saw coconut trees weathering out the storms in due time. Coconut trees in Davao Oriental, in the 3 municipalities, were literally felled by Typhoon Pablo. Such is a seeming trend in recent years in facing climate change stronger typhoons hitting previously typhoon free zones. And, indeed, Typhoon Yolanda (November 2013) showed the world how a super typhoon of category 5 can wreak havoc to the population and the areas affected. Yolanda made landfall in 6 provinces and affected a total of 36 provinces, most in the Visayas and its coconut areas. Guian in Eastern Samar, one of the few coconutforested areas10, was completely devastated
10

Coconut forest is a COIR-term for areas that go way beyond the PCA recommended spacing for planting coconuts.

Page

15

along with Tacloban City. Death toll appears unparalleled and reports have yet to be firmed up as to crop-damage. Existing video-documentation of the tragedy show only coconut trees left standing in the affected areas. According to PCA, more than 208,000 hectares are planted with over 22 million trees in Leyte, providing a living for 122,000 families, or around 600,000 people. ABSCBN reports that ground reports and aerial views of Leyte and nearby Samar Island tell the same story -- coconut trees either toppled, snapped or sheared when Typhoon Haiyan scythed across the region on November 8, packing winds of up to 315 kilometers (195 miles) per hour.

In a related coconut levy case, the Supreme Court issued yet another final decision on the United Coconut Planters Bank case (July 9, 2013). The Court pronounced: We, therefore, affirm, on this ground, that decision of the Sandiganbayan nullifying the shares of stock transfer to Cojuangco. Accordingly, the UCPB shares of stock representing the 72.2percent fully paid shares subject of the instant petition, with all dividends declared, paid or issued upon thereon, as well as any increments thereto arising from, but not limited to, the exercise of preemptive right, shall be reconveyed to the government of the Republic of the Philippines, which as we previously clarified, shall be used only for the benefit of all coconut farmers and for the development of the coconut industry.

After the small coconut farmers won the case of the 24% SMC shares in September 2012, the recently declared decision by the Supreme Court on UCPB as government-

Page

16

owned is yet another triumph. Unfortunately, these great victories are yet to translate favourable to its absolute beneficiaries the small coconut farmers. The primary question still remains will the small coconut farmers actually benefit from the recovered funds? The answer must be obvious as the coconut farmers, in principle, should be direct participants in and beneficiaries of the development and growth of the coconut industry. But is there anything at all to recover from the once-again Cojuangcocontrolled UCPB (thanks to PNOY)?

On the contrary, the UCPB-CIIF Group was fast to jump the gun on the SC decisions not favourable to Cojuangco. On December 2012 the UCPB with Cocolife filed a Motion for Declaratory Relief11 in Court to ask for a take on the recovered Php71 billion funds at Php7.5 billion each like taking a chunk of what had been lost to give back to Cojuangco. Atty. Nilo Divina, himself a part of the UCPB Board as Presidential Appointee, acted as counsel for the said Motion. This Motion, obviously, had the blessings of PCGG Chair Andres Bautista (Divinas de facto partner -in-law) who sits in both boards of UCPB and Cocolife. This refinancing strategy is reportedly perceived by DoF and PCGG to be, again, sadly, for the benefit of the coconut farmers ! The CIIF Oil Mills Group had followed this lead as well claiming more than Php2 billion to be used for its operational capitalization.

The more important note, however, should be that the decision on the UCPB case may be utilized considerably in reopening the case of the 20% SMC block granted to Cojuangco worth well over Php50 billion.12 The government, instead of leading the

11 12

Refer to ANNEXES Part 3: Special Civil Action for Declaratory Relief Refer to ANNEXES Part 4: True worth of SCs Coco Bank ruling, Joey Faustino

Page

17

farmers in efforts to recover the coco levies, tends to tail the initiative. Coconut farmer

groups who filed a complaint13 against Associate Justice-Ponencia Bersamin in the Ethics Committee are now contemplating on filing impeachment charges against the same for misleading the Court in saying that there existed no law defining ill-gotten wealth. Moreover, the government cannot even stand to collect the still unpaid 4% of the original 31% CIIF-SMC shares, now worth another Php17.5 billion, from Cojuangco and SMC. These shares have been ordered by the SC to revert to government since year 2000. The only word so far from Malacanang came from Presidential Spokesperson Abigail Valte saying that the Palace has left the decision and management of the UCPB to PCGG.

Previously in 2011, it was reported that a late 2010 US trip by PNoy raked in some USD 15 million investments for the countrys coconut industry. Leading the commitments were Vita Coco, a New York based firm marketing natural and fruit-flavored coconut water in tetra packs. The President announced that buko juice (young coconut water) had a big market in the United States. Like many others, he was not informed that it was actually matured coconut water that was being used for the coco drinks. Multinationals Coca Cola and Pepsi Cola followed suit by contracting desiccating plants (Peter Paul, Franklin Baker) all over the country as a source of matured coconut water for their health drinks.

While the investments undoubtedly may have added to the countrys economy, it did not change, in any manner, the lives of the of poor coconut farmers. The investing multinational companies, which normally boast of serious Corporate Social Responsibility, are
Page

13

Refer to ANNEXES Part 3: Panawagang Imbestigahan ang Hindi Maitatangging Kamalian sa Desisyong Pbor Kay Ginoong Eduardo Danding Coujuangco, Jr.

18

now under scrutiny by Oxfam studies14 for product traceability.

Coming from this rather unclear understanding of the huge market for coconut water from his US trip, President Aquino had again bragged in July 2012 about what he thought was a big boost for the countrys coconut industry. In his State of the Nation Address, the President announced a milestone in the coconut industry: Tingnan rin po natin ang industriya ng niyog at ang cocowater na dati tinatapon lang, ngayon, napapakinabangan na ng magsasaka. Noong 2009 483,862 liters ng cocowater ang iniluwas natin. Umangat po ito ng 1,807,583 liters noong 2010. Huwag po kayong magugulat: noong 2011: 16,756,498 liters [applause]puwede ho bang ulitin iyon?16,756,498 liters ng cocowater ang in-export ng Pilipinas. (Let us take a look at the coconut industry, coconut water that was merely wasted before now benefits the coconut farmers. In 2009 we exported 483,862 liters of coconut water. It increased to 1.8 million liters in 2010. Amazingly, in 2011, we exported 16.7 million liters can I repeat that (very proudly)? the country exported 16.7 million liters of coconut water.

Obviously the President was astonished by the sheer growth in volume of coconut water exports during his term. But apart from not understanding that the poor coconut

14

Coconut Water Supply Chains in the Philippines: Opportunities and Risks for Small Farmers, Oxfam / The Coco Water Craze: How are Small Coconut Farmers Benefiting?, GROW and Oxfam.

Page

19

farmers did not benefit at all from such cocowater exports15, he was also unaware that the country produces 5 billion liters of coconut water per year (computed as 1/3 liter per nut @ 15 billion nuts per year) the 16 million liters, therefore, is merely .0032 of the products potential.

Apart from reporting on the coconut water exports, the President presented what intercropping of coffee can do to increase coconut farmers income. NOTHING REGARDING THE MORE IMPORTANT ISSUE ON THE COCO LEVY COULD BE HEARD FROM THE PRESIDENT.

This deafening silence from the President on the issue of the coco levies had even encouraged the Danding Cojuangco camp to think of taking chunks
09 August 2013

from what had already been recovered by government. After decades of benefit and perks from the UCPB-CIIF Group of Companies, Cojuangco still wants to be paid for bridging the deal between First United Bank and the PCA in 1975.

Looking back, Ka Oca Santos had approached the President at the time of his electoral campaign to ask that efforts be made so that coconut farmers can benefit from the coco levies to continue what his mother had started when she was President. Ka Oca, then, hardly got a reply. Last November, Ka Oca again wrote that PNoy has 2.5 years left to speak out and give clear marching orders to all agencies concerned to do what is just16

15

Suppliers of coconut water buy the whole nut from the farmers, the price of which is based on existing copra prices as well. If copra is priced at Php 16 per kilo, the price of the whole nut shall be pegged at Php 4 per nut (more or less) as it takes 4 nuts to make a kilo of copra. 16 Refer to ANNEXES Part 4: PNoy can still help coco farmers, Ka Oca Santos.

Page

20

The Department of Agriculture (DA), as committed by Sec. Alcala during the 1st National Coco Farmers Conference, had carried the position of utilizing the coco levy funds annual interest earnings to establish village-level agro-industrial hubs. The DA seeks to put value-addition for farmers into the coconut communities up to the level of equity ownership. How it can be done might rest in the shoulders of a newly created body by the Executive under the DA a Project Management / Coordinating Office. Obviously there have been serious doubts if the Philippine Coconut Authority can deliver the much-needed results given the long experience and focus on mere copra and oil production. But prior to application of the village-level hubs, the 1st Conference can claim a small contribution in influencing the roadmaps prepared by the PCA and the NAPC. The two roadmaps have now been incorporated by NEDA to include the village level hubs. It is now called the Integrated Coconut Industry and Poverty Reduction Roadmap17. In one of the meetings of the Free Trade Alliance (05 November 2013), COIR was invited as one of the panel of reactors on the NEDA presentation of the so-called integrated roadmap.

COIR applied traffic light signals to comment on the said presentation: green for go, yellow for caution, and red for stop. The following points were raised (to which NEDA had no direct reply to except all points noted):
Page

17

Refer to ANNEXES Part 5.

21

Caution

The presentation does not look like a roadmap yet for its lacks basic directions for the farmers and the industry to take and indicators for them to follow. So far the contents presented appear to be merely a compilation of information to consider in making the roadmap. The information, however, mainly considers poverty among the millions of small coconut farmers a positive indication for whom the roadmap should be designed for.

Caution

The presentation lined up 12 provinces with high poverty incidence. Not all the cited 12 provinces, however, are lead coconut producing areas. This implies that the poverty in the other 8 areas may have been caused by some reason other than dependence on the copra industry may be applicable for another roadmap.

Caution

While the inclusion of building Local Coconut Industry Development Councils LCIDCs being a product of COIRs studies in the programs is relevant, there appears no indication on its role in the roadmap. The lack of details and processes for which the LCIDCs may be of great value tend to undermine coco community participation.

STOP

The roadmap found its importance with the recovery of a portion of the coconut levies. The making of the roadmap was an offshoot of the discussions in the Presidential Task Force on Coco Levy. But while this is so, not necessarily all details in the resulting roadmap may be applied using the levy funds. Fast-tracking agrarian reform, for example, should be an important feature of the roadmap but to be sourced out from the appropriations for CARPer and not the levy. The Conditional Cash Transfer

Page

that is sourced out from appropriations of the DSWD levy should not be

22

(CCT) and related programs may be anti-poverty measures of government

used in particular for the coco farmers as it will disadvantage them from the other recipients. Being a special fund for the benefit of the farmers and the industry would also not permit it to be used for disaster relief operations just the same. But at one point in time, the anti-poverty roadmap made by NAPC was targeting Php2 billion per year from the coco levy funds. It is relieving to know from NEDA now that the roadmap is now perceived by agencies to be sourced out from General Appropriations. I hope that is now the official view so as to stop confusing and complicating matters for the coconut farmers. STOP Do not proceed without considering the policy environment surrounding the industry. Policies concerning matters related to the industry need to be directed as well in order to ensure that the roadmap may be implemented meaningfully. The Agri-Fisheries Modernization Act does not consider coconut lands to be prime agricultural lands. The PCA charter is limited to copra and the oil industry (as well as other palm oils). The Biofuels Act may not be applied verbatim to the coconut industry it was more for sugar and ethanol. Trade policies would most especially affect the industry. GO The integration, especially with programs to build village-level processing hubs for value-addition to coconuts, should be pursued with aggressiveness. This is where the coconut levy funds can contribute greatly. There is actually no sense in trying to develop an industry without considering the huge implication to its major workforce the coconut farmers and farm workers. This is exactly why, in the first place, the copra and oil industry is into neverending perennial problems. The farmers and their communities need not be limited to producing raw materials only. GO Raising blends of coconut methyl ester into the diesel fuel would add to the domestic use and demand for coconuts. This shall immediately lessen the

Page

23

degree of dependence on the international market price for crude coconut oil (CNO) and add, somehow, to stabilization of copra prices. Impact to the beneficial-owners of the coco levy, however, may be reached if communities are empowered to process such value-addition to coconuts. This holds true with oil, coco milk and flour processing among others.

The Department of Budget and Management, in a memorandum18, following the same information coming from NAPC (12 provinces), had set guidelines for the preparation of the 2014 budget. The memo was hinged on a framework of rapid and inclusive growth and featured a focus on the 12 coconut areas. The justification offered was that a good portion of these areas have no access or lacks the access to national highways, ergo poverty ridden. And in order to promote growth, farm-to-market roads should be built USING THE COCO LEVIES??? Subsequent press releases by the DBM denied that coco levies will be tapped for such purpose on technical grounds that the entry of judgment had not yet been served so the government may not use the funds yet. Worried that the idea would not really directly benefit the coconut farmers, Ka Oca Santos wrote Malacanang to reiterate that the PNoy Administration must see to it that meaningful programs are made as coconut farmers are expecting to benefit from the coco levy funds. Press Secretary Sonny Coloma responded in a letter19 assuring Ka Oca that the President already has, in his possession, a copy of the integrated roadmap and that the DBM had issued a memorandum stating that coco levy funds shall be used starting 2014 to include building of highways to bring about inclusive growth!!!

18 19

National Budget Memorandum No. 118, April 25, 2013 (ANNEXES Part 5). Letter to Ka Oca Santos from the Presidential Communications Operations Office, July 09, 2013.

Page

24

The letter actually confirms the lack of appreciation the Administration has on the special fund called the coconut levies which was defined by the Supreme Court to be utilized only for the benefit of all the coconut farmers and the industry. Indeed the farm-to-market roads might benefit the coconut farmers to either transport their produce or allow investors to reach the areas. That, however, will not solve the perennial problems including poverty of the coco farming communities as they will, obviously, not have the vehicles to transport the still low value copra. Again, farm-tomarket roads should be a responsibility of government via General Appropriations and not via contributions of the coconut farmers. The coco levy funds, limited as they are have to be utilized for programs that will bring direct benefits to the coconut farmers. Utilizing the coco levies for this purpose (F-M-R) takes inclusive growth a notch higher to include contractors and, probably, a number of government officials.

The Agawang-Buko20 is expected to get more intense as the possibility of billions of funds is nearing release. As the saying goes, there are more guerilla fighters after the war than when it was being fought. The militant left is campaigning to CLAIM21 the coco levy funds in cash. The Secretary General of the Kilusang Magbubukid ng Pilipinas had often been quoted in news dailies to distrust in the Aquino Administration and convincing farmers to instead take the money in cash (runs contrary to SC decision where public funds were converted to private ownership). Anyway, this approach would get each coconut farmer a one-time windfall of less than Php20,000 hardly sustainable at all and will still not solve the perennial problems of the farmers and the industry. Later on the KMP was saying that it
20

Agawang-Buko is a local term for a traditional game in coconut producing provinces. The object of the game is to steal (agawin) a greased young coconut (buko) from an opponent to gain points. The result is a chaotic condition where all competitors try to get their hands on the greased nut for themselves. 21 Coco Levy Fund Ibalik sa Amin Movement (CLAIM) is a Kilusang Magbubukid ng Pilipinas-led movement.

Page

25

would want the farmers to benefit thru a social pension. Definitely, the left would not want the funds to be in the hands of government in perpetuity until such time, maybe, that they control government. The militant left, therefore, needs further study on the matter to be true to the farmers own benefit instead of merely issuing varying political statements thru media.

Other parties who are more in the social arena had formulated / recommended measures for consideration of either the Legislative or the Executive. There are now 4 versions of a draft fiat being lobbied to govern the recovered coconut levies:

1. DRAFT E.O.: PROVIDING THE GUIDELINES FOR THE MANAGEMENT OF THE COCO LEVY ASSETS, THE PROCEDURE OF RELEASES FROM THE COCO LEVY SPECIAL FUND FOR THE BENEFIT OF THE COCONUT FARMERS AND THE COCONUT INDUSTRY, THE CREATION OF INTER-AGENCY COORDINATING COMMITTEE ON THE COCONUT INDUSTRY, AND FOR OTHER PURPOSES Proponent: DoF / DBM / Presidential Task Force on Coco Levy Features A Statement of Policy prioritizing small coconut farmers. Remarks / Comments The statement takes policy a nick higher than simply all coconut farmers to, presumably, address poverty issues. Identification of coco levy assets to be composed of (but not limited to) the UCPB-CIIF Group of Companies, the 14 Holding Companies, the 24% CIIF-SMC shares and 4% SMC Treasury shares. Privatization of all coco levy assets is implied. Non-reference to 20% ECJ shares in SMC may go either way, pursue or give up on efforts to recover the said shares. Further audit and studies need to be made on the UCPB-CIIF Group of Companies. A number of them may be

Page

26

useful for programs for the small coconut farmers. Procedure for fund releases from the DBM is defined with final approval by the President. High probability of delay due to the many concerns of the Office of the President.

No limit or cap on amount and period, whatsoever, was considered allowing the use of the entire resources as long as the specified program dictates. Creation of a Multi-Sectoral Coordinating Committee on the Coconut Industry Composition: DA, DBM, DTI, NAPC, PCA, (2) coco farmers, (2) civil society. The President shall appoint the Chair. The 5:4 government and private combination reflects 22% participation of coconut farmer organizations granting that the public consultations are in order. As in previous observations, the

General responsibilities of the Coordinating Committee to be:

Administration tends to move towards a) Formulate a comprehensive and a direction of a totally separate integrated poverty reduction roadmap for the benefit of small program for the farmers and another farmers and farm workers; for the industry (a & b). b) Develop a comprehensive and sustainable Coconut Industry Development Roadmap for the revitalization and development of the Philippine Coconut Industry; c) Determine priority areas and communities for programs and projects undertaken pursuant to the above-mentioned

Page

27

roadmaps; d) Conduct an annual review and evaluation of the projects; and, e) Perform all acts that may be necessary Additional Note: There is no reference made to earmark of define the coco levies to form a Trust Fund rendering it less secure from AND FOR OTHER PURPOSES. 2. S.B. NO. 455. AN ACT PROVIDING FOR THE DISPOSITION OF THE COCONUT LEVY ASSETS BY THE PRIVATIZATION AND MANAGEMENT OFFICE, CREATING THE COCONUT INDUSTRY FUND COMMITTEE, AND PROVIDING FOR THE MANAGEMENT, INVESTMENT, AND USE OF PROCEEDS FOR SUCH ASSETS FOR AND IN BEHALF OF THE COCONUT FARMERS AND FOR OTHER PURPOSES Proponent: Sen. Ralph Recto Features A Declaration of Policy to consolidate, expedite and deliver the benefits due to coconut farmers, especially the poor and marginalized, to attain a balanced, equitable, integrated sustainable growth and development of the industry. An audit of the coco levy assets by COA for privatization purposes. Creation of a Coconut Industry Fund, earmarked as Special Fund for the benefit of the coconut farmers and the development of the coconut industry; to be utilized within a period of ten (10) years. The defined fund renders it more secure to be used solely for its purpose. More importantly, the definition is in accordance with the SC ruling, in its rightful order of priority: Remarks / Comments Makes a prioritization to the poor and marginalized farmers.

Page

and,

28

1) Benefit of the coconut farmers;

2) Development of the coconut industry.

No rationalization of the 10-year period was referred to even in the Explanatory Note. Creation of the Coconut Industry Fund Committee Composition: NEDA (Chair), DoF (ViceChair), DoJ, DA, PCA, Private Sector Banking, (3) accredited coconut farmers organizations (appointed by the President from nominations by PCA/NAPC). Committee Powers and functions: Identify all portions of the Coco Levy Assets for liquidation, privatization and disposition x x x; a) Formulate / amend x x x investment guidelines; b) Make, approve any and all disbursement from the Trust Fund x x x; c) Designate government depository banks x x x to administer the Trust Fund; d) Appoint and procure fund managers x x x to manage investments of the Trust Fund; e) Establish guidelines xxx for the conservation, rehabilitation and disposition of the Coco Levy Assets by the Privatization Management Office; f) Approve x x x the sale or Renders a 5:1:3 ratio of participation by government, private sector and coconut farmers organizations (33% participation in decision-making)

The Powers and Function of the Committee is heavier on the management aspect of the assets. The focus on management of the assets may have led to identification of the 10-year period instead of perpetual utilization.

Page

29

disposition of the assets x x x; g) Approve xxx rehabilitation of Coco Levy Assets pending disposition by the Privatization Management Office x x x; h) Exercise xxx ownership with respect to such assets x x x; i) Approve xxx financial requirements of the PMO in relation to the Act x x x; j) Appoint x x x and fix remuneration of personnel of the Committee; k) Prepare the Rationalization Plan for the development of the coconut industry x x x (among others, coconut productivity and investment programs, replanting, industry rehabilitation, scientific and medical research, integrated downstream processing, and market promotion programs); l) Exercise such other functions x x x as necessary x x x. The term of the Committee shall be coterminous with the term of the Trust Fund which shall be limited to a term of ten (10) years. Upon lapse, all assets and liabilities shall be assumed by the National Government. The term limits may work both ways, protect the fund from political changes or preserve the political status quo in terms of coconut industry development. Reporting requirements of the Committee is pegged on semi-annual basis made to the President and Congress. Monitoring is not defined, most especially not thru consultations with the coconut farmers. Indicators for reporting, therefore, may follow the same flawed current measurements in
Page

30

growth in agriculture (increased production, increase in volume of exports, etc.) Accreditation of Coconut Farmers Organizations by PCA and NAPC. PCA has been noted to put biases on farmer organizations it has organized in the past decades. First there was Cocofed, then the SCFO. NAPC has its own share of this. The effect is such that not the entire coconut communities are recognized in the process.

3. DRAFT S.B.: AN ACT CREATING THE COCONUT INDUSTRY TRUST FUND, PROVIDING FOR ITS MANAGEMENT AND FOR OTHER PURPOSES Proponent: Cocofed, Villasenor, Avila et al. Features A Declaration of Policy to accelerate development and vertical integration of the coconut industry through medium and long-term financing (capital investment) and social services for coconut farmerswith assistance to coconut farming organizations under a Coconut Industry Trust Fund that shall be administered by a Philippine Coconut Farmers Foundation. Remarks / Comments The statement appears to be ALL-IN at the onset! Very definitive, indeed! But for certain specific interests mainly. Cocofed, the party indicted in the coco levy cases, has not changed any since martial law days and the 2 other organizations are riding on it with blessings from Danding

Creation of a Coconut Industry Trust

Like Cocofed in the dark days of martial

Page

31

Cojuangco.

Fund for the following purposes: a) Finance developmental / operating expenses of recognized coco farmer organizations (scholarships, nurseries, replanting); b) Finance establishment and operation of industries and commercial enterprises and research; c) Finance social services for coconut farmers (social benefits); and, d) Finance programs to hasten and advance industrialization and diversification. Creation of a Philippine Coconut Farmers Foundation with principal office in Makati City. Composition: (15) Board of Trustees; (8) from government provided PCA is one; (7) from coconut industry sector provided that COCOFED, PKSMMN, and PASCFO are included.

rule when the coco farmers were milked with the levy public funds were used to sustain private organizations. Now the 2 others want the same as well.

Benefit is by exclusive membership only and not the farmers as a class. The more empowered the 3 organizations mentioned shall take over the lesser ones. ESPECIALLY THAT IT CONCENTRATES ALL POWERS TO THE FOUNDATION THE ONLY CONCERN REALLY IS TO PERPETUATE THEMSELVES IN POWER BY SECURING ACCESS AND CONTROL ON THE COCO LEVY FUNDS. All hail the wannabe Kings!

No justification / rationale offered for a

Page

32

Makati office.

Powers and functions of each officer of the Foundation. Limitation and allocation of trust funds to only net income subject to following stipulations: 5% admin / operations 25% revert to trust fund 70% programs / projects UCPB as Depository of fund.

For SEC registration maybe??? Proposes to use the trust funds in perpetuity.

No justification offered either. Cojuangco, Cocofed and PKSMMN, however, are back in control of the UCPB-CIIF Group of Companies the only logic.

Ground survey of coconut farmers by representatives of PCA, COCOFED, PKSMMN, and PASCFO.

Still assured dominance by the 3 organizations.

Additional Note: This draft starting with the Declaration of Policy until the end was obviously proposed primarily for certain specific interests with consideration of the coconut farmers, in general, only coming second. 4. DRAFT E.O.: DECLARING IT A NATIONAL POLICY TO EXPEDITE THE DELIVERY OF THE BENEFITS DUE TO THE COCONUT FARMERS AND THE COCONUT INDUSTRY UNDER VARIOUS PRESIDENTIAL DECREES BY CONSTITUTING THE COCONUT FARMERS TRUST FUND COORDINATING COUNCIL FOR THE COORDINATION THEREOF Proponent: Muti-Sectoral Task Force on Coco Levy Recovery (MSTF) Features A Declaration of Policy to consolidate, expedite and deliver the benefits due to coconut farmers, especially the poor and marginalized, to attain a balanced, equitable, integrated sustainable Remarks / Comments Makes a prioritization to the poor and

Page

33

marginalized farmers.

growth and development of the industry. Constitution of a Coconut Farmers Trust Fund for the development of the coconut industry and the ultimate benefit of the small coconut farmers and farm workers (assistance to coconut farmers, increased productivity, development of coconutbased enterprises, promotion of antipoverty programs). Capitalization of the Fund The Fund is declared firmly to be primarily for the (marginalized) small coconut farmers and farm workers in line with the development of the industry.

The CIIF-SMC block of shares as initial capital (open to other recovered coco levy assets, donations and grants) is proposed to be perpetually maintained.

Designation of Trustee Bank

To be designated by the President as allowed by applicable laws.

Creation of the Coconut Farmers Trust Fund Coordinating Council to administer and determine disposition / utilization of earnings and incomes. Composition: President (Chair), (4) from government being DA, farmer representative of the PCA Governing Board, NEDA and ______, (2) Private Banking Sector, (6) representatives from Coconut Farmers Organizations.

Renders a 5:2:6 ratio of participation by government, private sector and coconut farmers organizations (46% participation in decision-making).

With the President as Chair, all concerns shall be within the approval of the President.

Page

appointed by the President with a 3-

34

Members of the Council to be

year term, maximum of 2 terms. Functions and Responsibilities of the Council: a) Coordinate with PCA x x x; b) Coordinate and integrate, plans, programs and projects of the other implementing agencies x x x; c) Formulate an annual budget on the Work and Financial Plan for the utilization and allocation of the funds x x x; d) Recommend to the President the investment policy of the Trust Fund in consideration of coconut industry development studies and plans, specifically establishing priorities for preferential assistance to small coconut farmers and farm workers, to be reviewed periodically for any revision necessary. e) Formulate the rules and regulations governing the allocation, utilization and disbursements x x x; f) Formulate the Implementing Rules and Guidelines of the Order; g) Perform such other acts as may be necessary x x x. Cooperation with the Council by any instrumentality of government may be called upon when needed. With the diversity of programs needed for the farmers and the industry, the The Functions and Responsibilities is that of oversight with direct coordination and command on planning and implementation of programs and projects all with the Presidents approval.

Page

be mobilized.

35

whole government bureaucracy may

The coconut farmers still have reason to celebrate. While real and actual benefits are not tangible as of yet, the whole policy debate has advanced from basic legal doctrines to actual development initiatives.

Since decades ago Danding Cojuango and cohorts were claiming that they contributed to the coco levies and not the farmers who till the coconut lands. The term coconut farmers contained in the Presidential Decrees then was interpreted to be the landlords and big plantation owners who declared, but not necessarily paid, real estate taxes. After the fall of the Dictatorship the debate focused on the basic nature and character of the coco levies. The political nature of the case had caused the Courts to deal with issues with extreme caution for decades. The Supreme Court finally concluded the major cases half blind a portion public for the millions of coconut farmers and another, private for a single individual.

The current political trend appears to be quite depressing still with Cojuangco and cohorts back at the helm of the UCPB-CIIF Group, complements of the latter GMA Administration. The PNoy Administration even strengthened Cojuangcos hold further. The current PCGG appears no better than its most recent predecessor which converted common shares of the CIIF-SMC to preferred shares to the advantage of Cojuangco in SMC. Danding Cojuangco may be expected to slip out with the other block of 20% SMC shares if efforts to recover are left to government alone today.

But in any case, the government now holds on to some Php71 billion in cash from the recovered coco levies. The sheer amount involved dictates the importance of engaging the government from policy to implementation of projects and programs for the farmers, their communities and the coconut industry.
Page

36

Each of the policy proposals have its own merits and strengths; disadvantages and weaknesses just the same. The Cocofed proposal, though, deserves the least attention for simply being self-serving more than anything else. The positive points that present high-probability impact on the coconut farmers in the discussions, so far, are the following:

Positive Points Creation of a Perpetual Trust Fund that will secure the funds to serve its rightful intent and purpose. Creation of a Council / Committee composed of a mix of government, private and farmer representatives to manage, administer and coordinate execution of an integrated plan. The need for a rationalization plan or an integrated roadmap one for both farmers and industry development. The need to focus programs on marginalized small coconut farmers and farm workers and their plight against poverty. The participation of coconut farmers organizations in various levels of concern: decision-making, implementation and monitoring / evaluation. Compliance of strict governance and accountability in management and administration of the Trust Fund.

Proponent/s MSTF, Cocofed

DoF, MSTF, Sen. Recto

MSTF, Sen. Recto

DoF, MSTF, Sen. Recto

DoF, MSTF, Sen. Recto

DoF, MSTF, Sen. Recto

But all these are still on the table and whatever result comes out will, definitely, be a choice of President Benigno Simeon Aquino III. So the battle is merely half-done and

Page

37

the war is far from over. What is definite is that justice had not been served the

millions of genuine coconut farmers as of yet not after more than one year that government had held on to the recovered levy funds.

Such a concern was also the subject of a two-hour documentary on the coco levy funds scam COCORAKOT. Noted Journalist, Cheche Lazaro, featured the opposing claims by farmers, advocates for coco levy recovery, and Marc Cojuangco, the son of Danding. Ms. Lazaro established the issue on the coco levies by comparing it to the present reaction of the public on the issue of pork-barrel and the Php10 billion scam by Janet Napoles. The coco levy scam happened decades ago and is well worth over Php100 billion today yet left only to the farmers and a few advocates handling.

True to form, Marc Cojuangco echoed that his father should be rewarded for taking care of the coco levy monies for the farmers and investing it in profitable instruments such as SMC shares. Cojuangco also noted that the real beneficiaries of the coco levy should be the farmers that pay real estate taxes. He referred to the tillers and farm workers as merely seasonal and, therefore, not entitled to direct benefits.

Ka Oca Santos contributed his wisdom to the documentary as based on his timeless experience from the time the levy was collected (he was Batasan Pambansa Member) to

Page

citizen-petitioner to the cases in the Sandiganbayan and the Supreme Court. Ka Oca

38

the time the funds were audited by government (he was PCA Chief), and as private

cited that the erred decision of the Supreme Court on the 20% SMC shares in favor of Cojuangco the benefit of a single individual against that of millions of farmers should not be left to stay in the archives of the Judiciary for it will diminish an institution that was supposedly founded on fairness, truth and justice.

Towards the end of the documentary, Ms. Lazaro presented contradicting positions taken by various farmers groups and advocates on the handling and use of the controversial coco levy funds. What was common among them, though, is that:

a) government should be watched with vigilance to ensure that benefits do reach the small coconut farmers; and, b) the coconut farms should be geared towards value chain addition in order to effect meaningful changes in the poverty situation of the farmers and ultimately improve the industry.

In sum, the overall condition presents no other more appropriate time to promote and set up an alternative coconut development for communities who had suffered more than long enough from the traditional copra industry. Admittedly it is government that would take on the biggest role in such a perspective, primarily with the use of the coco levy funds. And for any government effort to be a success, the genuine participation of the farmers and their communities is highly essential.

Part III. COCO DEVELOPMENT ALTERNATIVES FOR COMMUNITIES

The coconut levy funds, being declared as public funds, shall be the responsibility and obligation of the government, especially the President, primarily to the small coconut farmers and farm workers. In determining which path (tuwid na daan) to take, appropriate guides (in the following order) are recommended:
Page

39

Consult, study and determine meaningful utilization of the

tilization

funds to optimize direct impact to the beneficial owners the coconut farmers. This direction may be reflected in the integrated plan alongside priority areas. Based on such studies and determination, the management of

anagement

the funds may be set for good governance purposes. Ergo, investments & returns needed to implement the plan, securing the funds in trust (Trust Fund) and its purpose by a fiat. Transparency and accountability is of utmost importance in administering the special funds. Programs and projects

dministration

implemented must be completely traceable and open for changes if needed. Monitoring and evaluation, therefore, should be an inherent element apart from modes of releases and technical, often bureaucratic, requirements.

The participation of the coconut farmers in all three levels of concern is necessary to achieve impact on the poor communities. All problems besetting the industry find its way to the farms and the farmers / farm workers who compose 92% of the industrys workforce. What plagues the industry plagues the farms and the farmers / farm workers. Any solution, therefore, should be directed towards making impact on the farms and the farmers / farm workers. The abovementioned guide aptly reflects where the coconut levies should be directed to: UMA is a visayan term for farm. The coconut levies should be directed to benefit the (UMA and the MAG-UUMA SA LUBI) farms and the coco farmers the coconut communities. This will ultimately spell sustainability of the coconut industry.

Ergo, the discussions should really be about which programs / projects would benefit the coconut communities most; and, how the programs / projects can be delivered to

Page

40

them judiciously. These should be programs / projects that contain the following elements:

1. Direct community and/or local government participation in production and consolidation; 2. Value chain-addition to coconuts (copra and non-copra, other uses) thru village-level processing / semi-processing and technology transfer communities become more than mere raw material suppliers; and, 3. Joint business cooperation for equity sharing with the communities themselves.

Through continuing consultations and studies, COIR had aided selected coco communities to build on an OPTIONS MENU for village-level coconut industry development. The OPTIONS MENU is aimed at providing various choices of development initiatives that may be implemented at the community level. The impact expected out of each may be projected to aide in the communities choice of alternatives, whether piecemeal or in combination. The said menu may be utilized
Page
Village-level Coconut Industry Development Menu

by barangays and municipalities for local

41

development planning.

Coconut farms compose the base of the menu. From farm and pest management concerns, the menu moves horizontally to raw materials from coconuts and intercrops, and vertically to value-addition of each. This means that even in the choice of intercrops value-addition to coconuts, the main crop, ought to be a consideration i.e. coffee and cacao in combination with coconuts as finished products not just raw materials. At the center is the main raw material, coconut meat, to which value is added vertically.

The menu provides a wide range of options for village-level consideration which the communities can use in planning and feasibility study making. Government and other donors can also utilize the menu to select a certain level of impact to be achieved in a given area. It contains both general and specific integrated value-addition to coconut farms under short and medium-term periods. And most importantly, local and domestic markets have been considered for the main products more than that of export.

The menu was developed from a series of consultations and workshops with the LCIDCs of Camarines Norte and Davao Oriental, starting with benchmarking coconut profiles of barangays. The main course of the menu, so called, is FRESCA and FRESCO.

Advocates of the New Coconut Industry contend that copra production for oil processing takes out 75% of the real value of coconuts. Traditional copra-making throws away the matured coco water as the interest is only drying the meat. The husk is oftentimes wasted unless there is a buyer or decorticating plant nearby. The shell is usually made into charcoal for value-addition. But under current traditional practices all
Page

42

other parts are taken for granted and largely wasted in order to produce the low-value copra.

In the farm, it takes hard labor to harvest, gather, dehusk and separate the coconut meat from the shell. Then it takes days to dry coconut meat in the tapahan or underneath the sun so it can be used as input in the far-away big-scale mill (500-750 metric tons per day) for oil production. Farming communities are paid for the dried meat (copra) by a chain of traders who transports it to the mills this takes another set of days. By the time the copra reaches the mills it would have lessened in volume or accumulated moisture. The oil then, largely exported, is processed further for various finished products (food, pharmaceuticals, biofuel and oleochemicals). Further processing, however, basically entails chemical processes to take out infirmities from the unclean copra input.

The other alternative to copra at present is selling whole nuts for use by desiccating plants. Whole nut selling entails less labor cost for the farmers. The usual price offered for the whole nut, however, is still based on the prevailing buying prices of copra (copra price divided by four on the average). The desiccating plants are also big in scale (400,000-700,000 nuts per day) and far away from most of the source/supply areas. So the traders role becomes crucial in bringing the whole nut supply to the plants.

Bottomline, the coco farmers and the communities take the smallest slice of the volatile copra value high when demand is greater than the volume of supply and, most often, low as production and export volume increases. The whole low-technology and lowvalue utilization set up had been in existence for centuries keeping millions of small farmers and farm workers in dire poverty. To effectively address the dire situation of the marginalized coconut farmers and their communities, therefore, the following operative

Page

43

terms should become prime concerns:

Processing / semiprocessing facilities

VALUE CHAIN-ADDITION

Vs.

Raw Material Supplier

and technologies required Workable units along

VILLAGE-LEVEL / COMMUNITYBASED

the production sites

Vs.

Large-scale

within reach of the farming communities Value-chain for various

INTEGRATED PROCESSING

Vs.

Single Product-line

uses and markets Maximization of use of

FARM OPTIMIZATION / INTEGRATION

land in consideration of

Vs.

Monocrop

processing / semiprocessing facilities Stakes and ownership

EQUITY SHARING

Vs.

Investor-dependent

by the communities themselves To consider other

COMMUNITY/AREA-SPECIFIC

Vs.

General direction

assets and conditions prevailing in the area

FRESCA is a concept of village-level integrated DRY processing of fresh matured nuts at the volume of 1,000-5,000 nuts per day as differentiated from FRESCOs wet processing.

Page

and value-chain addition. Fresh matured coconut is centralized and its parts separated

44

The FRESCAHAN is likened to that of the Koprahan sites but designed for efficiency

for integrated use or processing. The fresh matured coconut is basically processed immediately into its primary products, clean and edible Fresh Coco Oil and Milkflour. The integrated design allows coconut water to be collected and processed into Coconut Water Concentrate and Purified Coco Water. The Coco Water Concentrate (gourmet sauce) may further be processed to make a health and energy drink Reconstituted Coco Water as what Pepsi Cola, Cocoa Cola, Vita Coco and Lucio Tan companies sell.

Other products of the FRESCAHAN may come from the solid fuel (husks and shells) used for burners i.e. charcoal, liquid smoke (natural pesticide) and coco ash (cleaning agent).

Apart from the fact that not a single part of the fresh matured coconut had been put to waste, the resulting finished products accumulate value in every step. In fact, the resulting products from FRESCA stations are even used for further value chain processing and are marketable / consumable in the communities themselves. The integrated value-chain addition also allows a genuine computation of the value of the raw material the fresh matured coconut (husk, shell, meat and water) initially at

Page

45

Php 8-10 per kilo. With a designed capacity of 5,000 nuts per day, a Fresca station is expected to mainly produce the following (conservatively computed at 1 kilo : 5 nuts) per day:

600 kgs. Fresh Coco Oil 400 kgs. Milkflour 1,600 liters Coco Water (1/3 liter per nut) for concentrate and purified water Liquid smoke, coconut charcoal and ash up for actual testing

Moreover, such community enterprise concept of value-adding to existing assets (coconuts) offers high probability of being able to expand by its own means either by duplication or simply by volume
COMMUNITY GRINDER / DRYER

capacity upscaling. Other nearby communities may later be capacitated

COMMUNITY GRINDER / DRYER

COMMUNITY GRINDER / DRYER

to join in on the entire value-chain as satellite semi-processing zones

UPSCALE FRESCA STATION

(community grinder / dryer) all depending on how the communities can cooperate among themselves.

COMMUNITY GRINDER / DRYER

COMMUNITY GRINDER / DRYER

The prospects appear simply inviting. The FRESCA station is but part and parcel of a larger value-chain hub called

COMMUNITY GRINDER / DRYER

FRESCO stations. The FRESCO stations normally combine dry and wet processes to produce higher value products from coconuts. The concept fits well with what the coconut industry terms as downstreaming. In addition to the products of FRESCA, the wet process essentially allows the separation of the coco milk and the coco flour. The production of coconut skimmed milk yet leads to another set of value-chain at larger

Page

46

scales with wider variations when combined with other processed agricultural products such as coffee and cacao.

FRESCO STATION (DRY & WET PROCESS)

FRESH COCO OIL NEUTRACEUTICAL

VALUE-ADDED OIL PRODUCTS

UPSCALE FRESCA STATION

CENTRIFUGE

COCO MILK / CREAM COCO SKIMMED MILK

OLEOCHEMICAL

VALUE-ADDED MILK PRODUCTS

COCO FLOUR
FROZEN SECTION

BREAD, PASTRIES, CAKES

Real-valued raw materials, job generation, value-chain addition and profit-sharing, increasing local purchasing power and spurring local economies, increasing communities health and financial sustainability are really what make up the New Coconut Industry. Allowing the opportunities at hand to be taken only by the traditionally big players / investors will change nothing and keep the coconut communities poor forever selling whole nuts that are based on prevailing copra prices.

Definitely, this is a primary area where the coconut levies ought to be utilized.

Government through the PCA would have a list of farmer organizations and a masterlist

Page

Today there exist no reliable coconut farmer registry, much more the coconut farms.

47

of those who have been covered by life insurances under Cocolife some of whom may not even be farmers. Coconut statistics are really made through random sampling by the Bureau of Agricultural Statistics. In many cases, even the local government units depend on these centralized random statistics. The United Coconut Associations of the Philippines gathers coconut statistics as well, presumably from government too, but sells the information. The PCA website would also hardly contain detailed statistics, and especially not any analysis, on the farmers and the industry that may be of great use for development planning and market-matching. Ergo, it is difficult to find hard, actual and reliable statistics on coconuts.

More importantly, the devastating experience of Tacloban, Leyte and Eastern Samar (2013) would show how critical an advanced registry can be when all physical records are destroyed after a disaster hits.

This realization gives way to the importance of having a coconut farmer registry with a relational database that is stored in and accessible from a cloud. Such a program exists but has not been tapped by government. The database, apart from registering individual farmers, their lands, trees and nuts, also has the capacity to monitor volumes of production (raw or processed) and the farmers economic activities. The said program would have more use if applied at the local communities with the help of the local government units.

In view of the suggestions coming from some participants in the 1 st National Coconut Farmers Conference, COIR took the initiative to meet with Officials of the Social Security System. Like other farmers and agricultural workers, the small coco farmers and farm workers would not have access to the SSS unless they are hired under big business
Page

48

companies. To widen its reach in the agri sector, the SSS accredited cooperatives as collecting agents.22

Coconut communities are far and wide in 69 coconut producing provinces. A greater number of coconut farmers, as of yet, have not formed or joined cooperatives. Under these circumstances, with a low capacity to pay and/or collect, social security for the farmers would have to be subsidized. SSS Officials computed social pensions for coconut farmers to reach an estimated amount of Php5 billion per year. If such an amount would be taken from the recovered coco levies it would greatly deplete the limited resources in no time at all.

It would then be more logical to utilize the coco levies to empower the sector and spur economic activities that would generate more income for the coco communities so they may afford contributions, and organize them into economic units or enterprises that would allow collections for the SSS.

There is still much to be defined as to the nature of the coconut levies being a special fund for development so that farmers become participants in and beneficiaries of such development. The fund should not be made available simply for any such use that would bring meager benefits to the millions of poor coconut farmers. That was the mistake of the past. Scholarships hardly affected the great number of coconut farming communities. Life insurance required death before benefit. Building of oil mills further marginalized the small farmers to become mere copra producers.

22

Refer to Annexes Part 7: Guidelines on Accreditation of Cooperatives as Collecting Agents of the Social Security System.

Page

49

The various laws providing for the collection of the coco levies meaningfully worded a logical and noble intent to develop an industry for the millions of small farmers. But insatiable greed defeated the whole idea. The United Coconut Planters Bank was established to solve the perennial credit problems of the coconut farmers but never had a coconut loan portfolio.

Today there is another opportunity to correct the mistakes of the past. But it will have to be done with great political will by those seated in power. With the proliferation of a thousand proposals, each having a justification on its own, a decision will have to be made.

To date, the establishment of village-level hubs appears to be nearest to the meaningful intent of the coconut levies. The industry will do well to craft a serious roadmap for development. But again, the coco levies may not fund the entire roadmap and its related concerns. Government, as it had done in the past, can continue with its traditional programs on coconuts without using the coco levies. While admittedly, the coco levies may enhance and add to these traditional programs, it would have to be critically done so under a specific direction of impacting the lives of the millions of poor coconut farmers through economic empowerment (village-level hubs) that will benefit not only the communities, but the industry and the countrys economy.

The long-wait for justice to be served to the coconut farmers is not over yet. But the initiatives may be started in the right direction of establishing a New Coconut Industry that the small coconut farmers and farm workers can hold on to and depend for a better life in the near future.

Page

A NEW BEGINNING

50